Liability for Future Policy Benefits, Policyholder's Account Balances, and Deferred Acquisition Costs

9 Months Ended

Sep. 30, 2023

Insurance [Abstract]

Long-Duration Insurance Contracts Disclosure

Liabilities for future policy benefits represent the cost of claims that we estimate we will eventually pay to our policyholders which includes policy liabilities for claims not yet incurred and for claims that have been incurred or are estimated to have been incurred but not yet reported to us. Liabilities for future policy benefits also include the related expenses for our non interest-sensitive life and accident and health products. The liability for future policy benefits is calculated based on the present value of the estimated future policy benefits less the present value of estimated future net premiums collected. Net premiums represent the portion of the gross premium required to provide for all benefits and expenses, excluding acquisition costs or any costs that are required to be charged to expense as incurred. In calculating the liability for future policy benefits, our long-duration contracts are grouped into cohorts by product type and contract issue year.

The calculation of the liability for future policy benefits involves numerous assumptions including assumptions related to discount rate, lapses, mortality, and morbidity. The discount rate assumptions were initially set based on the expected investment yield of the assets supporting the reserves at the transition date of ASU 2018-12, which was January 1, 2021, for policies originally issued on or before the transition date. The discount rate assumptions for new cohorts established after the transition date, are initially set based on the policy issuance date or policy renewal date, and are based on an upper-medium grade fixed-income instrument, which is generally equivalent to a single-A interest rate matched to the duration of our insurance liabilities. As cohorts are grouped by product type and issue year, a weighted average discount rate is utilized as policies are issued or renewed throughout the year. We utilize a reference portfolio of fixed-income instruments that have been A-rated by one of the major credit rating agencies. For products with liability cash flows that exceed the duration of observable single-A fixed income instruments, we use the last market observable yield and use extrapolation approaches to determine yield assumptions for durations beyond the last market observable duration. For the discount rate assumptions for products in our Unum International segment, we utilize observable market data in the local debt markets in the UK and Poland.

The initial, also referred to as the original, discount rate assumptions established for each cohort are used to determine interest accretion which is reported as a component of policy benefits on the statements of income. After policy issuance or policy renewal, the discount rate assumptions are updated quarterly and used to update the liability at each reporting date to the current discount rate, with the corresponding change reflected as the change in the effect of discount rate assumptions on the liability for future policy benefits, net of reinsurance, on the statement of changes in other comprehensive income (loss). The weighted average current discount rate was 5.6 percent at September 30, 2023 compared to 5.0 percent at December 31, 2022. The weighted average current discount rate was 5.2 percent at September 30, 2022 compared to 2.5 percent at December 31, 2021. The increase in weighted average current discount rate during both periods is due primarily to an increase in U.S. Treasury rates.

Policyholder lapse and mortality assumptions reflect the probability that an insureds’ coverage is discontinued due to lapsation or death of the insured. For our life insurance products, mortality assumptions also reflect the probability that a benefit payment occurs. Policyholder lapse and mortality assumptions are based on our actual historical experience adjusted for future expectations. Claim incidence and claim resolution rate assumptions related to morbidity and mortality are based on actual experience or industry standards adjusted as appropriate to reflect our actual experience and future expectations. The claim incidence rate assumption is the rate at which new claims are submitted and the development of this assumption may involve many factors, including the age of the insured, the insured's occupation or industry, the benefit plan design, and certain external factors such as consumer confidence and levels of unemployment. The claim resolution rate assumption is the probability that a claim will close due to recovery or death of the insured and is used to estimate how long benefits will be paid on an open claim. Certain product lines may utilize additional assumptions in calculating the liability for future policy benefits in addition to those listed above such as premium rate increases for long-term care, benefit offsets for long-term disability, and claim costs for voluntary benefits. Claim costs capture the combined effect of the incidence rate, the expected level of benefit to be paid, and the claim resolution rate.

Cash flow assumptions are reviewed and updated, as needed, at least annually. Assumptions may be updated more frequently if necessary based on trending experience and future expectations. On a quarterly basis, cohort level cash flow measures are updated based on the emergence of actual experience. The updated cash flows are used to determine the updated net premiums and the net premium ratio, which is the present value of benefits and related expenses divided by the present value of gross premiums. The updated net premium ratio is used to calculate the updated liability for future policy benefits as of the beginning of the year, at the original discount rate. The change in the liability for future policy benefits, at the original discount rate, as of the beginning of the period, resulting from changes in cash flow assumptions and resulting from the emergence of actual experience from expected experience, is reflected as the policy benefits - remeasurement loss (gain) in the consolidated

statements of income. The impact of all other changes in the liability for future policy benefits are reflected as policy benefits in the consolidated statements of income.

For most products, a net premium methodology is applied to each cohort to estimate the liability for claims not yet incurred in which discounted gross benefits are compared to discounted gross premiums. In this methodology, actual experience to date is combined with projected future cash flows to determine a net premium ratio for each cohort. The future cash flows include the costs of future expected claims as well as future cash flows on claims that have already been incurred. The net premium ratio is then used to estimate the liability for future policy benefits. The liability for future policy benefits represents the present value of future claims and associated expenses less the present value of future net premiums, which is derived by multiplying the present value of future gross premium by the net premium ratio.

For our group products in the Unum US and Unum International segments, we evaluate the liability for future policy benefits required for active policies in comparison to incurred claims. Given the term nature of the products, their renewal features, and level funding nature of the premium for these products, we have determined that the liability value is generally zero for policies that are not on claim. In this situation, our liability for future policy benefit values are limited to the liability associated with claims incurred as of the valuation date.

Multiple estimation methods exist to establish liabilities for the incurred claim component of future policy benefits. Available reserving methods utilized to calculate these liabilities include the tabular reserve method, the paid loss development method, the incurred loss development method, the count and severity method, and the expected claim cost method. No single method is better than the others in all situations and for all product lines. The estimation methods we have chosen are those that we believe produce the most accurate and reliable liability.

We use a tabular reserve methodology on reported claims for our Unum US group long-term disability and individual disability claims as well as for our Closed Block long-term care claims. Under the tabular reserve methodology, the liability for reported claims is based on certain characteristics of the actual reported claimants and their related policy provisions, such as age, length of time disabled, and medical diagnosis, as well as assumptions regarding claim duration, discount rate, and policy benefit offsets. We believe the tabular reserve method is the most accurate to calculate long-term liabilities and allows us to use the most available known facts about each claim. Incurred, but not reported (IBNR) liabilities for future policy benefits for our longer-term products are calculated using the count and severity method using historical patterns of the claims to be reported and the associated claim costs. For Unum US group short-term disability products, an estimate of the value of future payments to be made on claims already submitted, as well as on IBNR claims, is determined in aggregate using a paid loss development method rather than on the individual claimant basis that we use for reported claims on longer-term products. The average length of time between the event triggering a claim under a policy and the final resolution of those claims is much shorter for these products and results in less estimation variability.

Liabilities for claims for Unum US group life and accidental death and dismemberment products are related primarily to death claims reported but not yet paid, IBNR death claims, and a liability for waiver of premium benefits in the event the policyholder becomes disabled. The death claim liability is based on the actual face amount to be paid, the IBNR liability is calculated using the count and severity method based on historical patterns of the claims, and the waiver of premium benefits liability is calculated using the tabular reserve methodology.

Liabilities for claims related to the group and individual dental and vision products reported in our Unum US and Colonial Life segments have a short claim payout period. As a result, the liabilities, which primarily represent IBNR and a small amount of claims pending payment, are calculated using the paid loss development method.

Liabilities for future policy benefits supporting the group products within our Unum International segment are calculated using generally the same methodology that we use for Unum US group disability and group life liabilities. Liabilities for future policy benefits for our Unum UK group life dependent product, which provides an annuity to the beneficiary upon the death of an employee, are calculated using discounted cash flows, based on our assumptions for claim duration and discount rates. The assumptions used in calculating liabilities for future policy benefits for this segment are based on standard country-specific industry experience, adjusted for our own experience.

Certain products in the Colonial Life segment and the Unum US voluntary benefits product line have shorter-term benefits, which generally have less estimation variability than our longer-term products because of the shorter claim payout period. Our liabilities for future policy benefits for these lines of business are predominantly determined using the incurred loss development method based on our own experience. The incurred loss development method uses the historical patterns of payments by loss date to predict future claim payments for each loss date. Where the incurred loss development method may not be appropriate, we estimate the incurred claims using an expected claim cost per policy or other measure of exposure.

During the third quarter of 2023, we completed our annual cash flow assumption review and updated certain of our assumptions used to develop the liability for future policy benefits which resulted in a net increase to the liability. The increase to the liability for future policy benefits was driven primarily by assumption updates in our Closed Block long-term care product line, partially offset by assumption updates in the Unum US group disability product line and in the Colonial Life segment. The long-term care assumption updates were primarily driven by lower expectations for active policy lapse and mortality assumptions, partially offset by an increase to expected future premium rate increases. The Unum US group disability product line assumption updates were primarily related to claim resolution assumptions driven by favorable claim recovery trends, while the Colonial Life segment assumption updates were driven by improved claim cost assumptions and increases in policyholder lapse rates.

During the third quarter of 2022, we completed our annual cash flow assumption review and updated certain of our assumptions used to develop the liability for future policy benefits which resulted in a net increase to the liability. The increase to the liability for future policy benefits was driven primarily by assumption updates related to the reinsured portion of our Closed Block segment, mostly offset by assumption updates in the Unum US segment and the Colonial Life segment. The Closed Block segment assumption updates related to the reinsured portion of our all other product line primarily included updates to mortality assumptions for the advanced age portion of our individual disability claimant population. This advanced age claimant population was included in the block ceded as a part of the Closed Block individual disability reinsurance transaction with Commonwealth Annuity and Life Insurance Company. As a result, a corresponding increase was reported in our consolidated balance sheet as a reinsurance recoverable related to these assumption updates. The Unum US segment assumption updates were primarily driven by sustained improvement in claim recovery trends in our group disability and group life product lines, partially offset by lower social security benefit offsets in our group disability product line. The Colonial Life segment assumption updates were primarily driven by improved claim cost assumptions.

Actual variance from expected experience for the first nine months of 2023 and 2022 was driven primarily by our Unum US group disability and Unum US group life and accidental death and dismemberment product lines. The variance for both periods was primarily due to higher than expected claim resolutions driven by recoveries in the Unum US group disability product line and lower than expected new claim incidence for waiver of premium benefits in the Unum US group life and accidental death and dismemberment product line. The variance for the first nine months of 2023 is also impacted by our Closed Block long-term care product line and our Unum US individual disability product line. The variance for our Closed Block long-term care product line was driven by higher than expected incidence, while the variance in our Unum US individual disability product line was driven primarily by lower than expected new claim incidence. The variance for the first nine months of 2022 was also impacted by our Colonial Life cancer and critical illness product line which was driven primarily by lower claim costs.

For the nine months ended September 30, 2023, there were certain cohorts within the Colonial Life segment, related to our cancer and critical illness product line, and certain cohorts within the Closed Block segment, related to our long-term care product line, for which net premiums exceeded gross premiums. The cohorts for which net premiums exceeded the gross premiums in the Closed Block long-term care product line resulted in a $215.5 million reduction to income before income tax for the nine months ended September 30, 2023. For the nine months ended September 30, 2023 and 2022, the cohorts for which net premiums exceeded the gross premiums in the Colonial Life cancer and critical illness product line had an immaterial impact to income before income tax. There were no other product lines with cohorts for which net premiums exceeded gross premiums for the nine months ended September 30, 2023 or 2022.

The following table presents balances as well as the changes in the liability for future policy benefits for traditional long duration products.

	Consolidated
	September 30
	2023		2022
	(in millions of dollars)
Present Value of Expected Net Premiums
Balance, beginning of year	$	12,426.2	$	15,881.3
Beginning balance at original discount rate	12,695.3		13,186.2
Effect of changes in cash flow assumptions	1,499.2		(101.9)
Effect of actual variances from expected experience	(121.8)		(252.3)
Adjusted beginning of year balance	14,072.7		12,832.0
Issuances	861.2		727.2
Interest accretion	430.8		430.0
Net premiums collected	(1,164.9)		(1,184.1)
Foreign currency	(0.1)		(49.5)
Ending balance at original discount rate	14,199.7		12,755.6
Effect of change in discount rate assumptions	(709.0)		(418.5)
Balance, end of period	$	13,490.7	$	12,337.1
Present Value of Expected Future Policy Benefits
Balance, beginning of year	$	48,929.4	$	65,305.0
Beginning balance at original discount rate	49,689.0		50,397.2
Effect of changes in cash flow assumptions	1,702.0		(92.4)
Effect of actual variances from expected experience	(356.4)		(459.6)
Adjusted beginning of year balance	51,034.6		49,845.2
Issuances1	2,547.0		2,602.7
Interest accretion	1,670.3		1,689.3
Benefit payments	(4,106.1)		(4,112.1)
Foreign currency	19.6		(485.7)
Ending balance at original discount rate	51,165.4		49,539.4
Effect of change in discount rate assumptions	(3,111.7)		(1,484.8)
Balance, end of period	$	48,053.7	$	48,054.6
Net liability for future policy benefits	$	34,563.0	$	35,717.5
Other	1,703.3		1,872.7
Total liability for future policy benefits	36,266.3		37,590.2
Less: Reinsurance recoverable related to future policy benefits	7,449.0		8,154.6
Net liability for future policy benefits, after reinsurance recoverable	$	28,817.3	$	29,435.6
1Issuances include new policy issuances for most product lines. For our Unum US group disability, Unum US group life and AD&D and Closed Block - All Other product lines and certain of our Unum International product lines, this line represents new claim incurrals.

The following tables summarize the amount of gross premiums and interest accretion reflected in the statements of income as well as the undiscounted and discounted expected gross premiums and expected future benefit payments and the weighted average interest rates for traditional long duration products presented in the rollforward activity above.

	Consolidated
	Nine Months Ended September 30
	2023		2022
	(in millions of dollars)
Amount recognized in the statement of income:
Gross premiums or assessments	$	7,278.4	$	7,033.8
Interest accretion	$	1,239.5	$	1,259.3

	Consolidated
	September 30
	2023			2022
	(in millions of dollars, except weighted average data)
Amount of undiscounted:
Expected future benefit payments	$	105,306.1		$	97,202.5
Expected future gross premiums	$	38,581.4		$	35,301.8
Amount of discounted (at interest accretion rate):
Expected future gross premiums	$	25,435.2		$	23,835.8
Weighted average interest rate:
Interest accretion rate	4.8		%	4.8		%
Current discount rate	5.6		%	5.2		%
Weighted average duration of the liability	11.5 years			11.0 years

The following table presents the balances and changes in the reserves for future policy benefits for traditional long duration products in the Unum US segment.

	September 30, 2023
	Group Disability		Group Life and AD&D		Voluntary Benefits		Individual Disability		Total Unum US
	(in millions of dollars)
Present Value of Expected Net Premiums
Balance, beginning of year	$	—	$	—	$	868.2	$	1,202.9	$	2,071.1
Beginning balance at original discount rate	—		—		937.9		1,228.1		2,166.0
Effect of changes in cash flow assumptions	—		—		180.7		5.0		185.7
Effect of actual variances from expected experience	—		—		(98.2)		(13.6)		(111.8)
Adjusted beginning of year balance	—		—		1,020.4		1,219.5		2,239.9
Issuances	—		—		258.6		164.0		422.6
Interest accretion	—		—		21.4		36.3		57.7
Net premiums collected	—		—		(124.2)		(131.7)		(255.9)
Ending balance at original discount rate	—		—		1,176.2		1,288.1		2,464.3
Effect of change in discount rate assumptions	—		—		(119.4)		(62.2)		(181.6)
Balance, end of period	$	—	$	—	$	1,056.8	$	1,225.9	$	2,282.7
Present Value of Expected Future Policy Benefits
Balance, beginning of year	$	5,533.3	$	972.6	$	1,999.5	$	3,192.8	$	11,698.2
Beginning balance at original discount rate	5,793.1		998.5		2,141.2		3,244.5		12,177.3
Effect of changes in cash flow assumptions	(100.2)		—		170.1		7.9		77.8
Effect of actual variances from expected experience	(187.8)		(28.2)		(109.6)		(42.3)		(367.9)
Adjusted beginning of year balance	5,505.1		970.3		2,201.7		3,210.1		11,887.2
Issuances1	907.1		356.1		270.4		173.8		1,707.4
Interest accretion	137.6		15.8		64.3		123.2		340.9
Benefit payments	(1,186.8)		(402.1)		(143.9)		(203.5)		(1,936.3)
Ending balance at original discount rate	5,363.0		940.1		2,392.5		3,303.6		11,999.2
Effect of change in discount rate assumptions	(310.1)		(35.6)		(280.7)		(190.0)		(816.4)
Balance, end of period	$	5,052.9	$	904.5	$	2,111.8	$	3,113.6	$	11,182.8
Net liability for future policy benefits	$	5,052.9	$	904.5	$	1,055.0	$	1,887.7	$	8,900.1
Other	0.5		1.0		2.4		26.0		29.9
Total liability for future policy benefits	5,053.4		905.5		1,057.4		1,913.7		8,930.0
Less: Reinsurance recoverable related to future policy benefits	32.8		6.2		13.2		148.1		200.3
Net liability for future policy benefits, after reinsurance recoverable	$	5,020.6	$	899.3	$	1,044.2	$	1,765.6	$	8,729.7
1Issuances include new policy issuances for most product lines. Issuances for Unum US group disability and Unum US group life and AD&D represents new claim incurrals.

	September 30, 2022
	Group Disability		Group Life and AD&D		Voluntary Benefits		Individual Disability		Total Unum US
	(in millions of dollars)
Present Value of Expected Net Premiums
Balance, beginning of year	$	—	$	—	$	1,124.8	$	1,494.3	$	2,619.1
Beginning balance at original discount rate	—		—		1,032.3		1,279.6		2,311.9
Effect of changes in cash flow assumptions	—		—		(23.4)		(73.7)		(97.1)
Effect of actual variances from expected experience	—		—		(79.7)		(37.4)		(117.1)
Adjusted beginning of year balance	—		—		929.2		1,168.5		2,097.7
Issuances	—		—		126.0		123.5		249.5
Interest accretion	—		—		22.3		38.2		60.5
Net premiums collected	—		—		(128.6)		(130.5)		(259.1)
Ending balance at original discount rate	—		—		948.9		1,199.7		2,148.6
Effect of change in discount rate assumptions	—		—		(79.4)		(37.2)		(116.6)
Balance, end of period	$	—	$	—	$	869.5	$	1,162.5	$	2,032.0
Present Value of Expected Future Policy Benefits
Balance, beginning of year	$	6,725.7	$	1,124.1	$	2,697.3	$	4,017.3	$	14,564.4
Beginning balance at original discount rate	6,158.3		1,058.3		2,201.8		3,253.3		12,671.7
Effect of changes in cash flow assumptions	(102.0)		(32.9)		(39.9)		(53.4)		(228.2)
Effect of actual variances from expected experience	(174.1)		(29.0)		(82.3)		(43.1)		(328.5)
Adjusted beginning of year balance	5,882.2		996.4		2,079.6		3,156.8		12,115.0
Issuances1	1,038.9		377.5		140.5		131.1		1,688.0
Interest accretion	162.2		18.8		65.2		116.9		363.1
Benefit payments	(1,228.7)		(424.1)		(147.5)		(192.8)		(1,993.1)
Ending balance at original discount rate	5,854.6		968.6		2,137.8		3,212.0		12,173.0
Effect of change in discount rate assumptions	(284.6)		(32.5)		(167.5)		(95.7)		(580.3)
Balance, end of period	$	5,570.0	$	936.1	$	1,970.3	$	3,116.3	$	11,592.7
Net liability for future policy benefits	$	5,570.0	$	936.1	$	1,100.8	$	1,953.8	$	9,560.7
Other	0.5		0.9		15.1		24.7		41.2
Total liability for future policy benefits	5,570.5		937.0		1,115.9		1,978.5		9,601.9
Less: Reinsurance recoverable related to future policy benefits	36.8		6.0		23.4		189.7		255.9
Net liability for future policy benefits, after reinsurance recoverable	$	5,533.7	$	931.0	$	1,092.5	$	1,788.8	$	9,346.0
1Issuances include new policy issuances for most product lines. Issuances for Unum US group disability and Unum US group life and AD&D represents new claim incurrals.

The following tables summarize the amount of gross premiums and interest accretion reflected in the statements of income as well as the undiscounted and discounted expected gross premiums and expected future benefit payments and the weighted average interest rates for traditional long duration products in the Unum US segment presented in the rollforward activity above.

	Nine Months Ended September 30, 2023
	Group Disability		Group Life and AD&D		Voluntary Benefits		Individual Disability		Total Unum US
	(in millions of dollars)
Amount recognized in the statement of income:
Gross premiums or assessments	$	2,210.4	$	1,403.2	$	592.1	$	474.2	$	4,679.9
Interest accretion	$	137.6	$	15.8	$	42.9	$	86.9	$	283.2

	Nine Months Ended September 30, 2022
	Group Disability		Group Life and AD&D		Voluntary Benefits		Individual Disability		Total Unum US
	(in millions of dollars)
Amount recognized in the statement of income:
Gross premiums or assessments	$	2,073.5	$	1,396.0	$	583.1	$	446.9	$	4,499.5
Interest accretion	$	162.2	$	18.8	$	42.9	$	78.7	$	302.6

	September 30, 2023
	Group Disability			Group Life and AD&D			Voluntary Benefits			Individual Disability			Total Unum US
	(in millions of dollars, except weighted average data)
Amount of undiscounted:
Expected future benefit payments	$	6,474.2		$	1,069.2		$	5,107.4		$	5,292.7		$	17,943.5
Expected future gross premiums	$	—		$	—		$	5,317.5		$	5,701.8		$	11,019.3
Amount of discounted (at interest accretion rate):
Expected future gross premiums	$	—		$	—		$	3,663.8		$	4,099.5		$	7,763.3
Weighted average interest rate:
Interest accretion rate	4.0		%	2.3		%	5.0		%	5.1		%	4.2		%
Current discount rate	5.4		%	3.1		%	5.7		%	5.7		%	5.3		%
Weighted average duration of the liability	4.3 years			2.7 years			18.2 years			9.6 years			6.9 years

	September 30, 2022
	Group Disability			Group Life and AD&D			Voluntary Benefits			Individual Disability			Total Unum US
	(in millions of dollars, except weighted average data)
Amount of undiscounted:
Expected future benefit payments	$	7,077.3		$	1,124.5		$	4,555.1		$	5,112.5		$	17,869.4
Expected future gross premiums	$	—		$	—		$	4,006.6		$	5,461.8		$	9,468.4
Amount of discounted (at interest accretion rate):
Expected future gross premiums	$	—		$	—		$	2,970.1		$	3,916.2		$	6,886.3
Weighted average interest rate:
Interest accretion rate	3.8		%	2.4		%	5.1		%	5.1		%	4.1%
Current discount rate	5.0		%	3.1		%	5.3		%	5.2		%	4.9%
Weighted average duration of the liability	4.4 years			3.1 years			18.0 years			9.4 years			6.8 years

Unum International Segment

The following table presents the balances and changes in the reserves for future policy benefits for traditional long duration products in the Unum International segment.

	September 30
	2023		2022
	(in millions of dollars)
Present Value of Expected Net Premiums
Balance, beginning of year	$	197.1	$	260.5
Beginning balance at original discount rate	246.8		258.1
Effect of changes in cash flow assumptions	(5.1)		(0.3)
Effect of actual variances from expected experience	12.2		5.4
Adjusted beginning of year balance	253.9		263.2
Issuances	16.9		13.4
Interest accretion	6.9		6.5
Net premiums collected	(16.9)		(17.3)
Foreign currency	(0.1)		(49.5)
Ending balance at original discount rate	260.7		216.3
Effect of change in discount rate assumptions	(37.6)		(46.9)
Balance, end of period	$	223.1	$	169.4
Present Value of Expected Future Policy Benefits
Balance, beginning of year	$	2,231.4	$	3,181.8
Beginning balance at original discount rate	2,495.5		2,703.8
Effect of changes in cash flow assumptions	17.7		(20.1)
Effect of actual variances from expected experience	(9.2)		23.5
Adjusted beginning of year balance	2,504.0		2,707.2
Issuances1	277.3		287.9
Interest accretion	47.7		50.0
Benefit payments	(307.5)		(270.3)
Foreign currency	19.6		(485.7)
Ending balance at original discount rate	2,541.1		2,289.1
Effect of change in discount rate assumptions	(297.1)		(345.4)
Balance, end of period	$	2,244.0	$	1,943.7
Net liability for future policy benefits	$	2,020.9	$	1,774.3
Other	30.3		24.9
Total liability for future policy benefits	2,051.2		1,799.2
Less: Reinsurance recoverable related to future policy benefits	69.4		57.8
Net liability for future policy benefits, after reinsurance recoverable	$	1,981.8	$	1,741.4
1Issuances for Unum International primarily represents new claim incurrals.

The following tables summarize the amount of gross premiums and interest accretion reflected in the statements of income as well as the undiscounted and discounted expected gross premiums and expected future benefit payments and the weighted average interest rates for traditional long duration products in the Unum International segment presented in the rollforward activity above.

	Nine Months Ended September 30
	2023		2022
	(in millions of dollars)
Amount recognized in the statement of income:
Gross premiums or assessments	$	667.7	$	590.4
Interest accretion	$	40.8	$	43.5

	September 30
	2023			2022
	(in millions of dollars, except weighted average data)
Amount of undiscounted:
Expected future benefit payments	$	4,012.8		$	3,642.0
Expected future gross premiums	$	1,035.7		$	814.9
Amount of discounted (at interest accretion rate):
Expected future gross premiums	$	676.8		$	545.1
Weighted average interest rate:
Interest accretion rate	4.0		%	3.9		%
Current discount rate	5.4		%	5.9		%
Weighted average duration of the liability	8.6 years			8.5 years

Colonial Life Segment

The following table presents the balances and changes in the reserves for future policy benefits for traditional long duration products in the Colonial Life segment.

	September 30
	2023		2022
	(in millions of dollars)
Present Value of Expected Net Premiums
Balance, beginning of year	$	3,745.4	$	4,597.0
Beginning balance at original discount rate	4,046.4		4,158.9
Effect of changes in cash flow assumptions	(322.7)		(32.3)
Effect of actual variances from expected experience	(77.1)		(105.8)
Adjusted beginning of year balance	3,646.6		4,020.8
Issuances	421.7		464.3
Interest accretion	94.3		99.4
Net premiums collected	(454.0)		(483.6)
Ending balance at original discount rate	3,708.6		4,100.9
Effect of change in discount rate assumptions	(348.7)		(353.2)
Balance, end of period	$	3,359.9	$	3,747.7
Present Value of Expected Future Policy Benefits
Balance, beginning of year	$	5,581.1	$	7,054.8
Beginning balance at original discount rate	6,163.9		6,201.5
Effect of changes in cash flow assumptions	(402.9)		(85.9)
Effect of actual variances from expected experience	(90.1)		(133.4)
Adjusted beginning of year balance	5,670.9		5,982.2
Issuances	461.1		502.9
Interest accretion	161.0		165.1
Benefit payments	(462.1)		(467.4)
Ending balance at original discount rate	5,830.9		6,182.8
Effect of change in discount rate assumptions	(731.9)		(667.5)
Balance, end of period	$	5,099.0	$	5,515.3
Net liability for future policy benefits	$	1,739.1	$	1,767.6
Other	24.3		23.9
Total liability for future policy benefits	1,763.4		1,791.5
Less: Reinsurance recoverable related to future policy benefits	0.9		1.3
Net liability for future policy benefits, after reinsurance recoverable	$	1,762.5	$	1,790.2

The following tables summarize the amount of gross premiums and interest accretion reflected in the statements of income as well as the undiscounted and discounted expected gross premiums and expected future benefit payments and the weighted average interest rates for traditional long duration products in the Colonial Life segment presented in the rollforward activity above.

	Nine Months Ended September 30
	2023		2022
	(in millions of dollars)
Amount recognized in the statement of income:
Gross premiums or assessments	$	1,240.3	$	1,228.3
Interest accretion	$	66.7	$	65.7

	September 30
	2023			2022
	(in millions of dollars, except weighted average data)
Amount of undiscounted:
Expected future benefit payments	$	9,568.2		$	9,984.0
Expected future gross premiums	$	11,847.5		$	12,205.8
Amount of discounted (at interest accretion rate):
Expected future gross premiums	$	8,684.1		$	8,996.4
Weighted average interest rate:
Interest accretion rate	4.3		%	4.4		%
Current discount rate	5.7		%	5.3		%
Weighted average duration of the liability	16.9 years			17.9 years

Closed Block Segment

The following table presents the balances and changes in the reserves for future policy benefits for traditional long duration products in the Closed Block segment.

	September 30, 2023
	Long-term Care		All Other		Total Closed Block
	(in millions of dollars)
Present Value of Expected Net Premiums
Balance, beginning of year	$	6,412.6	$	—	$	6,412.6
Beginning balance at original discount rate	6,236.1		—		6,236.1
Effect of changes in cash flow assumptions	1,641.3		—		1,641.3
Effect of actual variances from expected experience	54.9		—		54.9
Adjusted beginning of year balance	7,932.3		—		7,932.3
Interest accretion	271.9		—		271.9
Net premiums collected	(438.1)		—		(438.1)
Ending balance at original discount rate	7,766.1		—		7,766.1
Effect of change in discount rate assumptions	(141.1)		—		(141.1)
Balance, end of period	$	7,625.0	$	—	$	7,625.0
Present Value of Expected Future Policy Benefits
Balance, beginning of year	$	21,199.9	$	8,218.8	$	29,418.7
Beginning balance at original discount rate	20,221.6		8,630.7		28,852.3
Effect of changes in cash flow assumptions	2,009.4		—		2,009.4
Effect of actual variances from expected experience	106.7		4.1		110.8
Adjusted beginning of year balance	22,337.7		8,634.8		30,972.5
Issuances1	—		101.2		101.2
Interest accretion	850.7		270.0		1,120.7
Benefit payments	(624.2)		(776.0)		(1,400.2)
Ending balance at original discount rate	22,564.2		8,230.0		30,794.2
Effect of change in discount rate assumptions	(579.3)		(687.0)		(1,266.3)
Balance, end of period	$	21,984.9	$	7,543.0	$	29,527.9
Net liability for future policy benefits	$	14,359.9	$	7,543.0	21,902.9
Other2	12.8		1,606.0		1,618.8
Total liability for future policy benefits	14,372.7		9,149.0		23,521.7
Less: Reinsurance recoverable related to future policy benefits	4.6		7,173.7		7,178.3
Net liability for future policy benefits, after reinsurance recoverable	$	14,368.1	$	1,975.3	$	16,343.4
1Issuances for Closed Block - All Other represents new claim incurrals.
2Other for Closed Block - All Other primarily includes our closed block group pension products and certain of our ceded closed block individual life products.

	September 30, 2022
	Long-term Care		All Other		Total Closed Block
	(in millions of dollars)
Present Value of Expected Net Premiums
Balance, beginning of year	$	8,404.7	$	—	$	8,404.7
Beginning balance at original discount rate	6,457.3		—		6,457.3
Effect of changes in cash flow assumptions	27.8		—		27.8
Effect of actual variances from expected experience	(34.8)		—		(34.8)
Adjusted beginning of year balance	6,450.3		—		6,450.3
Interest accretion	263.6		—		263.6
Net premiums collected	(424.1)		—		(424.1)
Ending balance at original discount rate	6,289.8		—		6,289.8
Effect of change in discount rate assumptions	98.2		—		98.2
Balance, end of period	$	6,388.0	$	—	$	6,388.0
Present Value of Expected Future Policy Benefits
Balance, beginning of year	$	30,089.6	$	10,414.4	$	40,504.0
Beginning balance at original discount rate	19,870.8		8,949.4		28,820.2
Effect of changes in cash flow assumptions	24.9		216.9		241.8
Effect of actual variances from expected experience	(39.3)		18.1		(21.2)
Adjusted beginning of year balance	19,856.4		9,184.4		29,040.8
Issuances1	—		123.9		123.9
Interest accretion	829.7		281.4		1,111.1
Benefit payments	(548.7)		(832.6)		(1,381.3)
Ending balance at original discount rate	20,137.4		8,757.1		28,894.5
Effect of change in discount rate assumptions	629.6		(521.2)		108.4
Balance, end of period	$	20,767.0	$	8,235.9	$	29,002.9
Net liability for future policy benefits	$	14,379.0	$	8,235.9	$	22,614.9
Other2	22.8		1,759.9		1,782.7
Total liability for future policy benefits	14,401.8		9,995.8		24,397.6
Less: Reinsurance recoverable related to future policy benefits	5.3		7,834.2		7,839.5
Net liability for future policy benefits, after reinsurance recoverable	$	14,396.5	$	2,161.6	$	16,558.1
1Issuances for Closed Block - All Other represents new claim incurrals.
2Other for Closed Block - All Other primarily includes our closed block group pension products and certain of our ceded closed block individual life products.

The following tables summarize the amount of gross premiums and interest accretion reflected in the statements of income as well as the undiscounted and discounted expected gross premiums and expected future benefit payments and the weighted average interest rates for traditional long duration products in the Closed Block segment presented in the rollforward activity above.

	Nine Months Ended September 30, 2023
	Long-term Care		All Other		Total Closed Block
	(in millions of dollars)
Amount recognized in the statement of income:
Gross premiums or assessments	$	521.2	$	169.3	$	690.5
Interest accretion	$	578.8	$	270.0	$	848.8

	Nine Months Ended September 30, 2022
	Long-term Care		All Other		Total Closed Block
	(in millions of dollars)
Amount recognized in the statement of income:
Gross premiums or assessments	$	523.0	$	192.6	$	715.6
Interest accretion	$	566.1	$	281.4	$	847.5

	September 30, 2023
	Long-term Care			All Other			Total Closed Block
	(in millions of dollars, except weighted average data)
Amount of undiscounted:
Expected future benefit payments	$	61,672.0		$	12,109.6		$	73,781.6
Expected future gross premiums	$	14,678.9		$	—		$	14,678.9
Amount of discounted (at interest accretion rate):
Expected future gross premiums	$	8,311.0		$	—		$	8,311.0
Weighted average interest rate:
Interest accretion rate	5.6		%	4.6		%	5.2		%
Current discount rate	5.8%			5.7		%	5.8		%
Weighted average duration of the liability	16.6 years			7.3 years			13.3 years

	September 30, 2022
	Long-term Care			All Other			Total Closed Block
	(in millions of dollars, except weighted average data)
Amount of undiscounted:
Expected future benefit payments	$	52,756.7		$	12,950.4		$	65,707.1
Expected future gross premiums	$	12,812.7		$	—		$	12,812.7
Amount of discounted (at interest accretion rate):
Expected future gross premiums	$	7,408.0		$	—		$	7,408.0
Weighted average interest rate:
Interest accretion rate	5.5		%	4.6		%	5.2%
Current discount rate	5.3		%	5.3		%	5.3%
Weighted average duration of the liability	15.7 years			7.4 years			12.5 years

Reconciliation

A reconciliation of the liability for future policy benefits reflected in the preceding rollforwards to the related liability balances in the consolidated balance sheets are as follows:

	September 30
	2023		2022
	(in millions of dollars)
Liability for future policy benefits
Unum US1	$	8,930.0	$	9,601.9
Unum International	2,051.2		1,799.2
Colonial Life	1,763.4		1,791.5
Closed Block1	23,521.7		24,397.6
Other products1	236.1		217.8
Total liability for future policy benefits	$	36,502.4	$	37,808.0

1Unum US excludes dental & vision and medical stop-loss product lines and Closed Block excludes our participating fund account, which represents policies issued by one of our subsidiaries prior to its 1986 conversion from a mutual stock life insurance company. The liabilities associated with these products are included within Other products.

Policyholders' account balances primarily include our universal life and corporate-owned life insurance products. Policyholders' account balances reflect customer deposits and interest credited less cost of insurance, administration expenses, surrender charges, and customer withdrawals. Our unearned revenue reserve, claim reserves and certain other reserves related to our universal life products and corporate-owned life insurance products are also reported as a component of policyholders’ account balances. Policyholders' account balances require loss recognition testing. We perform loss recognition tests on these reserves annually, or more frequently if appropriate, using best estimate assumptions as of the date of the test, without a provision for adverse deviation. We group the policy reserves for each major product line within a reporting segment when we perform the loss recognition tests. If the policy reserves determined using these best estimate assumptions are higher than our existing policy reserves net of any deferred acquisition cost balance, the existing policy reserves are increased or deferred acquisition costs are reduced to immediately recognize the deficiency. This becomes the new basis for reserves going forward, subject to future loss recognition testing. Anticipated investment income, based on our anticipated portfolio yield rates after consideration for defaults and investment expenses, is considered when performing loss recognition testing for long-duration contracts.

The following table presents the balances and changes in the policyholders' account balances:

	September 30, 2023
	Unum US - Voluntary Benefits		Colonial Life		Closed Block - All Other		Total
	(in millions of dollars, except weighted average data)
Balance, beginning of year	$	586.8	$	852.4	$	4,159.4	$	5,598.6
Premiums received	44.9		64.4		25.2		134.5
Policy charges1	(45.8)		(56.3)		(78.9)		(181.0)
Surrenders and withdrawals	(23.6)		(28.5)		(12.1)		(64.2)
Benefit payments	(7.5)		(5.6)		(191.0)		(204.1)
Interest credited	17.0		25.7		239.0		281.7
Other	6.7		(0.2)		24.3		30.8
Balance, end of period	578.5		851.9		4,165.9		5,596.3
Reserves in excess of account balance	99.2		16.6		32.4		148.2
Total policyholders' account balances	677.7		868.5		4,198.3		5,744.5
Less: Reinsurance recoverable related to policyholders' account balances	1.0		—		4,198.3		4,199.3
Net policyholders' account balances, after reinsurance recoverable	$	676.7	$	868.5	$	—	$	1,545.2
Weighted average crediting rate	4.0%		4.1%		8.0%		6.9%
Net amount at risk2	$	4,600.0	$	8,901.6	$	1,807.1	$	15,308.7
Cash surrender value	$	568.9	$	810.1	$	4,033.4	$	5,412.4
1Contracts included in the policyholder account balances are generally charged a premium and/or monthly assessments on the basis of the account balance.
2For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date.

	September 30, 2022
	Unum US - Voluntary Benefits		Colonial Life		Closed Block - All Other		Total
	(in millions of dollars, except weighted average data)
Balance, beginning of year	$	598.7	$	849.2	$	4,231.7	$	5,679.6
Premiums received	49.2		68.8		25.1		143.1
Policy charges1	(48.8)		(58.9)		(77.0)		(184.7)
Surrenders and withdrawals	(25.6)		(27.9)		(18.7)		(72.2)
Benefit payments	(8.0)		(6.0)		(189.3)		(203.3)
Interest credited	17.8		25.6		232.9		276.3
Other	5.8		0.1		30.2		36.1
Balance, end of period	589.1		850.9		4,234.9		5,674.9
Reserves in excess of account balance	89.4		17.5		31.0		137.9
Total policyholders' account balances	678.5		868.4		4,265.9		5,812.8
Less: Reinsurance recoverable related to policyholders' account balances	1.0		0.1		4,265.9		4,267.0
Net policyholders' account balances, after reinsurance recoverable	$	677.5	$	868.3	$	—	$	1,545.8
Weighted average crediting rate	4.1%		4.1%		7.6%		6.7%
Net amount at risk2	$	5,008.7	$	9,490.5	$	1,920.1	$	16,419.3
Cash surrender value	$	585.4	$	796.8	$	4,093.2	$	5,475.4
1Contracts included in the policyholder account balances are generally charged a premium and/or monthly assessments on the basis of the account balance.
2For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date.

The balance of the account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums is as follows.

	September 30, 2023
Range of Guaranteed Minimum Crediting Rate	At Guaranteed Minimum		1 Basis Point - 50 Basis Points Above		51 Basis Points - 150 Basis Points Above		Greater than 150 Basis Points Above		Total
	(in millions of dollars)
	Unum US - Voluntary Benefits
3.00% - 3.99%	$	91.6	$	—	$	—	$	—	$	91.6
4.00% - 4.99%	265.4		188.5		—		—		453.9
5.00% - 6.00%	33.0		—		—		—		33.0
	390.0		188.5		—		—		578.5
	Colonial Life
4.00% - 5.00%	845.8		6.1		—		—		851.9
	Closed Block - All Other
3.00% - 5.99%	431.3		1,181.2		27.1		—		1,639.6
6.00% - 8.99%	2.1		28.5		—		—		30.6
9.00% - 11.99%	398.4		1,914.7		—		—		2,313.1
12.00% - 15.00%	—		182.6		—		—		182.6
	831.8		3,307.0		27.1		—		4,165.9
Total	$	2,067.6	$	3,501.6	$	27.1	$	—	$	5,596.3

	September 30, 2022
Range of Guaranteed Minimum Crediting Rate	At Guaranteed Minimum		1 Basis Point - 50 Basis Points Above		51 Basis Points - 150 Basis Points Above		Greater than 150 Basis Points Above		Total
	(in millions of dollars)
	Unum US - Voluntary Benefits
3.00% - 3.99%	$	95.3	$	—	$	—	$	—	$	95.3
4.00% - 4.99%	277.4		182.2		—		—		459.6
5.00% - 6.00%	34.2		—		—		—		34.2
	406.9		182.2		—		—		589.1
	Colonial Life
4.00% - 5.00%	845.0		5.9		—		—		850.9
	Closed Block - All Other
3.00% - 5.99%	1,708.4		29.1		6.6		—		1,744.1
6.00% - 8.99%	30.5		—		—		—		30.5
9.00% - 11.99%	2,289.6		—		—		—		2,289.6
12.00% - 15.00%	170.7		—		—		—		170.7
	4,199.2		29.1		6.6		—		4,234.9
Total	$	5,451.1	$	217.2	$	6.6	$	—	$	5,674.9

Deferred Policy Acquisition Costs by Segment

Note 9 - Deferred Acquisition Costs

DAC represents the deferred incremental direct costs associated with the successful acquisition of new or renewal insurance contracts. Such costs include commissions, other agency compensation, certain selection and policy issue expenses, and certain field expenses. Acquisition costs that do not vary with the production of new business, such as commissions on group products which are generally level throughout the life of the policy, are excluded from the deferral.

Our insurance contracts are grouped by product type and contract issue year into cohorts consistent with the grouping used to estimate the related contract liabilities. DAC is amortized on a constant level basis over the life of the policy. For all products, in-force volume metrics are used as the constant level basis. The lapse and mortality assumptions used to amortize DAC for our traditional long-duration products are consistent with the assumptions used to estimate the liability for future policy benefits. The underlying assumptions used to determine DAC amortization are updated concurrently with any related assumption changes for the liability for future policy benefits and changes in estimates are recognized prospectively over the remaining expected term of the related contracts. Amortization expense is adjusted based on actual versus expected experience through an adjustment to the prospective rate of amortization.

For certain products, policyholders can elect to modify product benefits, features, rights, or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. These transactions are known as internal replacement transactions, principally on group contracts. Internal replacement transactions wherein the modification does not substantially change the policy are accounted for as continuations of the replaced contracts. The original policy continues to be reflected as an in force policy within its original cohort. The policy's expected life then impacts the amortization of remaining unamortized deferred acquisition costs within its cohort. The costs of replacing the policy are accounted for as policy maintenance costs and expensed as incurred. Internal replacement transactions that result in a policy that is substantially changed are accounted for as an extinguishment of the original policy and the issuance of a new policy. The original policy that was replaced is terminated from its original cohort and this termination is

reflected in the amortization rate of remaining unamortized deferred acquisition costs for the cohort. The costs of acquiring the new policy are capitalized and amortized as part of a new cohort.

During the third quarter of 2023, we updated our policyholder lapse and mortality assumptions used to develop the future amortization for DAC for the Unum US voluntary benefits product line and the Colonial Life segment. During the third quarter of 2022, we updated our policyholder lapse and mortality assumptions used to develop the future amortization for DAC for the Unum US individual disability and voluntary benefits product lines as well as for the Colonial Life segment. These assumption updates were consistent with the related assumption updates for the liability for future policy benefits.

The following tables display the changes in DAC throughout the period:

	September 30, 2023
	Unum US		Unum International		Colonial Life		Total
	(in millions of dollars)
Balance, beginning of year	$	1,185.1	$	37.0	$	1,337.9	$	2,560.0
Capitalization	230.6		10.8		226.1		467.5
Amortization expense	(199.2)		(6.1)		(153.4)		(358.7)
Foreign currency	—		(0.1)		—		(0.1)
Balance, end of period	$	1,216.5	$	41.6	$	1,410.6	$	2,668.7

	September 30, 2022
	Unum US		Unum International		Colonial Life		Total
	(in millions of dollars)
Balance, beginning of year	$	1,152.9	$	36.4	$	1,238.1	$	2,427.4
Capitalization	199.4		9.3		210.4		419.1
Amortization expense	(178.5)		(6.1)		(128.4)		(313.0)
Foreign currency	—		(7.0)		—		(7.0)
Balance, end of period	$	1,173.8	$	32.6	$	1,320.1	$	2,526.5

	September 30, 2023
	Group Disability		Group Life and AD&D		Voluntary Benefits		Individual Disability		Dental and Vision		Total Unum US
	(in millions of dollars)
Balance, beginning of year	$	61.0	$	49.3	$	601.0	$	464.4	$	9.4	$	1,185.1
Capitalization	44.7		28.9		85.2		62.6		9.2		230.6
Amortization expense	(42.1)		(29.5)		(79.5)		(40.2)		(7.9)		(199.2)
Balance, end of period	$	63.6	$	48.7	$	606.7	$	486.8	$	10.7	$	1,216.5

	September 30, 2022
	Group Disability		Group Life and AD&D		Voluntary Benefits		Individual Disability		Dental and Vision		Total Unum US
	(in millions of dollars)
Balance, beginning of year	$	60.9	$	53.9	$	588.6	$	441.8	$	7.7	$	1,152.9
Capitalization	38.1		26.9		76.0		50.9		7.5		199.4
Amortization expense	(38.0)		(30.5)		(66.6)		(36.8)		(6.6)		(178.5)
Balance, end of period	$	61.0	$	50.3	$	598.0	$	455.9	$	8.6	$	1,173.8